The Legal Framework for Public-Private Partnerships in Mozambique

Introduction

Public-Private Partnerships (“PPPs”) are a legal instrument through which the State and the private sector cooperate in the implementation of strategic investments, particularly in the construction, financing and operation of infrastructure and public services. 

In a context marked by budgetary constraints and a significant need for economic infrastructure, PPPs allow private capital to be mobilised within a structured legal framework, with the allocation of risks and responsibilities between the public and private partners.

In Mozambique, PPPs are not governed by a single legal instrument. They form part of an integrated regulatory framework combining:

• the specific PPP regime; 
• the general private investment regime; 
• the general public procurement regime; 
• the State’s financial control mechanisms. 

Understanding the interaction between these legal regimes is essential for both domestic and foreign investors, as well as for public decision-makers.

For investors, it is important to understand that a PPP is not merely an administrative contract, but rather a complex legal operation involving investment authorisation, structured risk allocation, mandatory financial guarantees, prior review by the Administrative Court, and specific dispute resolution mechanisms, including arbitration. This integrated approach enables a proper assessment of regulatory risk, contractual predictability, investment protection and project bankability.

For public decision-makers, it is important to ensure that the structuring of a PPP simultaneously complies with public procurement principles, private investment rules, financial control requirements and appropriate risk allocation, in order to protect the public interest, ensure the fiscal sustainability of the project and prevent future financial contingencies for the State.

1. Legal Framework Applicable to PPPs

The legal framework for PPPs is based mainly on the following instruments:

1. a) Law No. 15/2011, of 10 August — PPP Law

This Law establishes the guiding rules for the contracting, implementation and monitoring of public-private partnership undertakings, large-scale projects and business concessions.

1. b) Decree No. 16/2012, of 4 June — Regulation of the PPP Law

This Decree regulates Law No. 15/2011, of 10 August, and establishes the procedures applicable to the contracting, implementation and monitoring of Public-Private Partnerships, abbreviated as PPPs, Large-Scale Projects, abbreviated as LSPs, and Business Concessions, abbreviated as BCs, governed by Law No. 15/2011, of 10 August.

1. c) Law No. 8/2023, of 9 June — Private Investment Law

This Law establishes the legal regime, bases and general principles applicable to private investments in the Republic of Mozambique that are eligible for fiscal and non-fiscal guarantees and incentives.

1. d) Decree No. 8/2024, of 7 March — Regulation of the Private Investment Law

This Decree regulates the Private Investment Law, Law No. 8/2023, and establishes the procedures applicable to the approval and implementation of private investments in the Republic of Mozambique that are eligible for fiscal and non-fiscal guarantees and incentives.

1. e) Decree No. 79/2022, of 30 December — General Regulation on the Procurement of Public Works Contracts, Supply of Goods and Provision of Services to the State

This Decree establishes the legal regime applicable to the procurement of public works contracts, the supply of goods and the provision of services, including leasing, consultancy and concessions.

1. f) Decree No. 69/2013, of 20 December — Regulation on Small-Scale Public-Private Partnerships and Business Concessions

This Decree establishes the legal regime and procedures applicable to PPPs and Business Concessions whose investment value does not exceed MZN 5,000,000.00, creating a simplified regime applicable, in particular, to undertakings at local, provincial or district level.

2. What is a Public-Private Partnership?

The Law defines a PPP as an undertaking carried out in an area of public domain or involving the provision of a public service, under a contract, in which the private partner makes an investment and operates the relevant activity. Investments in the mineral and petroleum resources sectors are excluded from the PPP regime under Law No. 15/2011, Article 2(2)(a).

The essential elements are:

1. It involves a public asset or public service; 
2. There is full or partial private financing; 
3. The operation takes place for a fixed term; 
4. Ownership of the asset remains public, pursuant to Law No. 15/2011, Article 14. 

A PPP is not a transfer of public assets. It is a temporary concession for operation.

3. PPPs as Private Investment

The Private Investment Law expressly applies to PPPs, under Law No. 8/2023, Article 2(1)(b).

Under the Investment Law, PPPs are subject to an authorisation regime where the relevant investment projects seek to benefit from the guarantees and incentives provided for in the Private Investment Law, pursuant to Law No. 8/2023, Article 22(1)(b).

The Regulation establishes that the decision on an investment authorisation application falls within the competence of the Council of Ministers, under Decree No. 8/2024, Article 21(2)(b).

This means that:

The public tender does not replace investment authorisation. They are separate stages.

4. Legal Guarantees for Investors

The Investment Law provides for key structural guarantees, including:

• fair and non-discriminatory treatment, under Law No. 8/2023, Article 6; 
• recognition by the State of the investor’s property rights, including intellectual and industrial property rights, under Law No. 8/2023, Article 7; 
• protection against expropriation without fair compensation, under Article 8; 
• transfer of profits and dividends abroad, under Article 10; 
• access to courts and recourse to arbitration, under Article 26. 

These guarantees are particularly important for foreign investors.

5. PPP Procurement Procedures

The general rule is public tender, pursuant to Law No. 15/2011, Article 13.

Decree No. 79/2022 reinforces that the general public procurement regime is the public tender procedure, under Article 7.

The following procurement modalities may be adopted:

• Tender with Prior Qualification; 
• Two-Stage Tender; 
• Direct Award in exceptional circumstances, under Decree No. 79/2022, Article 9. 

Decree No. 79/2022 applies subsidiarily to PPPs, particularly in relation to:

• procedural stages; 
• decision-making criteria; 
• publicity rules; 
• public procurement principles, under Article 4. 

6. Private Initiative

The Law allows the private partner to propose a PPP project, under Law No. 15/2011, Article 13(5).

Even so, the proposal must be submitted to public tender.

However, the proponent benefits from a 15% preference margin, under Decree No. 16/2012, Article 14. In other words, there is no automatic award.

7. National Preference Margin

The General Regulation on the Procurement of Public Works Contracts, Supply of Goods and Provision of Services to the State establishes preference margins which, although general in nature, may be relevant in the context of PPP procurement:

• 15% preference margin for national works and services; 
• 20% preference margin for goods produced in Mozambique, under Decree No. 79/2022, Article 30. 

These rules may therefore affect PPPs involving the execution of works or the supply of goods.

8. Risk Allocation

Considering the financing mechanism of PPPs, usually based on project finance, the proper allocation of risks is central to the financial viability of the project.

Accordingly, the PPP Law provides for:

• responsibility for risk mitigation by the private partner and the contracted entity, under Law No. 15/2011, Article 17; 
• responsibility for risk mitigation by the Government and the contracting entity, under Law No. 15/2011, Article 16. 

9. Financial Guarantees

The private partner must provide the following guarantees, pursuant to Law No. 15/2011, Article 19:

• bid bond; 
• implementation guarantee; 
• performance guarantee; 
• undertaking handover guarantee, under Law No. 15/2011, Article 19, and Decree No. 16/2012, Article 33. 

10. Review by the Administrative Court

The legal regime for Public-Private Partnerships expressly provides that the main contract is subject to prior review.

Under Article 23 of Law No. 15/2011, the executed main PPP contract is subject to the issuance of a prior review visa by the legally competent entity.

This is a mandatory formality, not a merely contingent one. The requirement for a visa does not depend on a case-by-case finding of direct financial charges, but results from the very legal nature of the PPP contract as an instrument capable of generating current or contingent financial liabilities for the State.

The General Public Procurement Regulation also provides that procurement documentation must be submitted to the Administrative Court, under Decree No. 79/2022, Article 16(1)(n).

The full effectiveness of the main contract is conditional upon the granting of the visa. Until the prior review visa is issued, the contract cannot produce effects.

This preventive review is intended to ensure:

• the contract’s compliance with the law; 
• the financial regularity of the commitment undertaken; 
• compliance with applicable budgetary rules; 
• protection of the public interest. 

11. Publicity and Transparency

Article 23 of Law No. 15/2011 also establishes specific publicity obligations.

Without prejudice to the protection of commercially strategic and competitively sensitive information relating to the undertaking, the following must be published:

• the main terms of the contract, namely in the Government Gazette and on the Government portal; 
• the accounting reports and balance sheets relating to the activity of the undertaking. 

This regime reinforces the principles of transparency, accountability and public scrutiny that characterise public procurement in relation to strategic infrastructure.

12. Duration and Termination

The maximum duration varies according to the type of contract, pursuant to Law No. 15/2011, Article 22:

• 30 years for concessions of greenfield undertakings; 
• 20 years for concession contracts and contracts for the assignment of operation of existing undertakings requiring rehabilitation or expansion; 
• 10 years for management contracts for undertakings in operational condition. 

At the end of the term, the asset reverts to the State. However, there is a possibility of renewal or extension of the term, as follows:

• the duration of concessions for greenfield undertakings may be extended for up to 10 years where the undertaking is a greenfield large-scale project and the longevity and technological or biological requirements of its implementation or development process so require, under Law No. 15/2011, Article 22(2); 
• the Government may, by addendum to the contract, authorise the extension of the term set out in paragraph 1 for the period necessary to compensate for: additional investments made at the express request of the Government and agreed in an addendum to the contract approved by the competent entity; the application of prices or tariffs set by the Government below the cost price and agreed profitability margin; and mitigation of the effects of force majeure events, under Law No. 15/2011, Article 22(3). 

13. Stages of the PPP Process

The Regulation of the PPP Law provides that the full process of an undertaking generally follows a structured cycle of successive stages, under Decree No. 16/2012, Article 9.

This cycle reflects the complex nature of PPPs, which involve technical preparation, economic and financial assessment, a competitive procedure, long-term contractual performance and final handover of the asset.

13.1. Conception and Structuring Stage

The process begins with:

• conception of the initiative, under Article 9(1)(a); 
• definition of the guiding principles, under Article 9(1)(b); 
• preparation of technical, environmental, economic and financial feasibility studies, under Article 9(1)(c). 

Conception consists of developing the idea and preparing the preliminary project by the promoting entity, whether public or private, under Article 10.

The feasibility study must demonstrate, in technical and quantitative terms, the sustainability of the undertaking, under Article 11, including:

• economic assumptions; 
• financing structure; 
• cash flows; 
• profitability indicators, such as IRR, NPV and payback period; 
• equitable sharing of benefits among investors, the State and society. 

The costs of the study are borne by the promoting entity, under Article 11(4).

The sectoral entity may waive the conception and study stages where the proposal submitted already contains sufficient information for analysis and assessment, under Article 9(2).

14.2. Competitive Stage

This is followed by the public procurement stage, which comprises:

• promotion of the initiative and launch of the tender, under Article 9(1)(d) and Article 12; 
• analysis and evaluation of proposals, under Article 9(1)(e) and Article 19; 
• award, under Article 9(1)(f) and Article 20; 
• negotiation, under Article 9(1)(g) and Article 21; 
• approval of the undertaking and investment project, under Article 9(1)(h) and Article 22; 
• execution of the contract, under Article 9(1)(i) and Article 23. 

Procurement may take place through:

• Public Tender; 
• Tender with Prior Qualification; 
• Two-Stage Tender; 
• Direct Award, in exceptional circumstances, under Articles 13 to 17. 

The analysis and evaluation of proposals is carried out by a jury composed of sectoral and financial representatives, under Article 13(4), based on criteria such as:

• size of the investment; 
• financial benefits; 
• socioeconomic impact; 
• risk allocation, under Article 19. 

The negotiation must ensure that the final terms are not less favourable to the State than those on which the award was based, under Article 21.

14.3. Transfer and Implementation Stage

After execution of the contract and issuance of the prior review visa, the undertaking is transferred to the contracted entity, under Article 9(1)(j) and Article 24.

Implementation comprises the making of investments and the creation of the technical and material conditions necessary for operation, under Article 25.

14.4. Management, Monitoring and Evaluation Stage

During the term of the contract, the following stages take place:

• management, operation and maintenance, under Article 26; 
• monitoring and performance evaluation, under Article 27. 

Monitoring covers:

• operational performance; 
• economic and financial results; 
• compliance with contractual indicators; 
• verification of the financial and socioeconomic benefits provided for in Articles 33 and 34 of Law No. 15/2011. 

The Regulatory Authority issues periodic reports and submits them to the sectoral and financial supervisory authorities, under Article 27(2).

14.5. Handover Stage

The cycle ends with the handover of the undertaking, under Article 9(1)(n) and Article 28.

This stage includes:

• verification of contractual compliance; 
• due diligence of the assets; 
• assessment of non-amortised investments; 
• any agreed reimbursement; 
• signing of the Handover Instrument. 

The handover plan must be prepared at least three years before the end of the contract, under Article 28(4).

12. Monitoring and Social Responsibility

The investment is subject to continuous monitoring, under Decree No. 8/2024, Article 28.

The Investment Law imposes social responsibility obligations, under Law No. 8/2023, Article 13, including:

• promotion of local content; 
• social impact measures; 
• compliance with tax and labour obligations. 

13. Small-Scale PPPs

In addition to the general regime provided for in Law No. 15/2011 and Decree No. 16/2012, the legislator established a specific regime for Small-Scale Public-Private Partnerships and Business Concessions, approved by Decree No. 69/2013, of 20 December.

Small-scale undertakings are those whose investment does not exceed MZN 5,000,000.00.

This regime applies to initiatives promoted by central, provincial and district government entities, as well as by Local Authorities, and also to private initiatives.

Main Features of the Small-Scale Regime

1. a) Simplified Procedure

Procurement is carried out, as a rule, by Public Tender, although Direct Award may exceptionally be used where the tender is unsuccessful.

1. b) Reduced Maximum Terms

• 15 years for the concession of a greenfield undertaking; 
• 10 years for the assignment of operation of an existing undertaking; 
• 6 years for a management contract. 

1. c) Legally Fixed Financial Guarantee

The contracted entity must provide a performance guarantee equivalent to 2% of the investment volume.

1. d) Minimum Concession Fee

The undertaking must pay the contracting entity a monthly fee of not less than 3% of net revenue after indirect taxes.

1. e) Maintenance of Public Ownership

Public domain assets allocated to the undertaking remain the inalienable and unseizable property of the State.

Conclusion

The legal framework for Public-Private Partnerships in Mozambique is based on an integrated regulatory architecture combining the specific PPP framework, the private investment regime, general public procurement rules and the State’s financial control mechanisms. This articulation makes it possible, on the one hand, to create conditions of predictability and legal protection for investors — from project structuring, through competitive procurement, to implementation and handover of the undertaking — and, on the other hand, to strengthen the protection of the public interest through requirements of prior review, transparency and continuous monitoring.

For investors, an integrated reading of the regime is decisive for assessing the bankability and sustainability of the project, including the investment guarantees, obligations to provide financial guarantees, risk allocation and dispute resolution mechanisms, including arbitration. For public decision-makers, it is equally essential to ensure that each stage of the process — from conception and feasibility studies to award, negotiation, approval, implementation and handover — is conducted with procedural rigour and financial discipline, preventing future contingencies and ensuring that the expected economic and social benefits are achieved in a balanced manner.

In short, PPPs are sophisticated legal instruments for investment and the provision of strategic infrastructure. Their success depends less on the initial award and more on the proper structuring of the contract, the realism of the economic and financial assumptions, the quality of risk allocation and the robustness of the control, monitoring and dispute resolution mechanisms throughout the full life cycle of the undertaking.

References

Law No. 15/2011, of 10 August. Establishes the guiding rules for the contracting, implementation and monitoring of public-private partnership undertakings, large-scale projects and business concessions.

Decree No. 16/2012, of 4 June. Approves the Regulation of Law No. 15/2011, of 10 August, establishing the procedures applicable to the contracting, implementation and monitoring of Public-Private Partnerships, Large-Scale Projects and Business Concessions.

Law No. 8/2023, of 9 June. Approves the Private Investment Law and establishes the legal regime, bases and general principles applicable to private investment in the Republic of Mozambique.

Decree No. 8/2024, of 7 March. Approves the Regulation of the Private Investment Law.

Decree No. 79/2022, of 30 December. Approves the General Regulation on the Procurement of Public Works Contracts, Supply of Goods and Provision of Services to the State.

Decree No. 69/2013, of 20 December. Approves the Regulation on Small-Scale Public-Private Partnerships and Business Concessions.